Apple conspired to raise e-book prices, federal judge rules

A federal judge’s ruling that Apple conspired to raise e-book prices is the latest in the tech giant’s string of woes.

Caption

A federal judge’s ruling that Apple conspired to raise e-book prices is the latest in the tech giant’s string of woes.

Apple found liable in e-book trial Eddy Cue, the Apple executive who the government claims was the "chief ringleader" of a scheme to fix e-book prices. A federal judge ruled July 10 that Apple conspired with publishers to raise e-book prices to eliminate retail competition.Victor J. Blue/Bloomberg News

“Apple played a central role in facilitating and executing that conspiracy.” U.S. District Judge Denise Cote said in her ruling. “Without Apple’s orchestration of this conspiracy, it would not have succeeded as it did.”

The decision backs the Justice Department’s charge that the tech giant violated anti-trust laws by concocting a pricing scheme with the country’s top five book publishers to raise e-book prices when it entered the market in 2010 and to force its top competitor in that market, Amazon.com, to follow suit. The pricing structure, which is known as the agency model, allowed publishers, not retailers, to set the price of the digital books.

All of the publishers — Hachette, HarperCollins, Macmillan, Penguin and Simon & Schuster — agreed to settle the charges in the months that followed the original complaint. But Apple continued to defend the pricing structure, leading to a June trial that revealed much about the inner workings of the notoriously secretive company.

Read the verdict

A federal judge ruled that Apple Inc conspired to raise the retail prices of e-books in violation of antitrust law, and called for a trial on damages.

Testimony from Apple executives including Eddy Cue, senior vice president of Internet software and services, shed light on how he and Apple’s late co-founder, Steve Jobs, reached out to publishers and orchestrated deals that guaranteed Apple would get 30 percent of the revenue from sales.

“This result is a victory for millions of consumers who choose to read books electronically,” Assistant U.S. Attorney General Bill Baer said in a statement after the Wednesday morning. “Companies cannot ignore the antitrust laws when they believe it is in their economic self-interest to do so. This decision by the court is a critical step in undoing the harm caused by Apple’s illegal actions.”

But Cue denied that Apple had gone into the negotiations with the intent to raise prices.

The ruling could also have broader implications for the technology industry, as Apple, Amazon, Google and others grapple with government efforts to regulate their control over users’ access to books, movies, music and other online and mobile content.

Last month, Apple’s lawyers argued that if it lost the case, the “precedent will send shudders throughout the business community.”

As The Washington Post reported, some legal experts say the case could reach the Supreme Court.

Apple will appeal the decision, said spokesman Tom Neumayr in a statement.

“Apple did not conspire to fix ebook pricing and we will continue to fight against these false accusations,” Neumayr said. “When we introduced the iBookstore in 2010, we gave customers more choice, injecting much needed innovation and competition into the market, breaking Amazon’s monopolistic grip on the publishing industry. We’ve done nothing wrong and we will appeal the judge’s decision.”